We don't use the cash/envelope system, but we do watch each and every penny. I have a very detailed spreadsheet in Excel (yes, I'm the nerd) that I update on pretty much a daily basis. One of my tabs is a savings tab. This is not our $1000 emergency fund; it's where I track money we set aside each month for bills that are not paid on a monthly basis - homeowner dues, paper, insurance, etc. I also keep track of "left-over" monies we in certain categories - like car maintenance, home repair, gifts, etc. These are monies that I think Dave would probably encourage us to put toward our debt snowball. However, we feel more confident if we have a small fund to cover our ever changing life. If we were on the envelope system, it would be the same as just leaving that money in there for future purchases. It makes sense to me since not every month is the same and you never know when you might need it. I'm not talking about huge sums of money, although it can add up over time. Some of them keep growing each month, but I do re-evaluate about every 3 months and when possible I put some of it toward debt.
The advantage of this method is that it lets me take advantage of specials and sales when they happen. One of those opportunities just recently came my way. Amazon ran a special one-day sale with kid's shoes on sale for $9.89. These were name-brand, Buster Brown, shoes. Since Troy has almost outgrown his current shoes, I decided to take advantage of this sale. I got him 2 pairs of sandals and a pair of shoes for Addison. I also took advantage of the super-saver shipping. In all, I got 3 pairs of shoes for only $29.67 (with a savings of $65.14). That's an awesome deal!!!